High Court affirms the principle of effective interpretation

The central issue in the case of Oilive Pte Ltd. v Hunan Xiangzhong Mining Group Ltd. [2022] SGHC 43 revolves around the validity of an arbitrator's appointment. The plaintiff contended that the appointment of the arbitrator was not in accordance with the parties' agreement. The relevant part of the arbitration agreement prescribed that:

"THE TRIBUNAL SHALL CONSIST OF A SINGLE ARBITRATOR AGREED UPON BY BOTH PARTIES, OR IF NOT SO AGREED, BY THE CHAIRMAN FOR THE TIME BEING OF SIAC".

Since the arbitrator in this case was appointed by the President of the Court of Arbitration of the SIAC ("President") and not the Chairman of the SIAC ("Chairman"), the plaintiff's alleged that the Arbitrator's appointment was invalid.

The Court opined that Parties cannot 'appoint' arbitrators directly to a tribunal, even if they purport to do so in their agreement. The parties have the right to 'nominate' a candidate and thereafter the SIAC President makes the formal appointment". In light of this fact, the court was of the view that the Chairman does not have or retain any institutional powers to appoint an arbitrator, the arbitration agreement, when properly construed, simply provides for the Chairman (as a third person) to nominate the sole arbitrator in the event that the parties are unable to agree on whom to nominate, and for the President to subsequently appoint the sole arbitrator.

Additionally, before April 2013, the appointment of arbitrators was made by the Chairman. Following an internal reorganisation within the SIAC, the reference to Chairman was changed to the President. Thus, any reference to Chairman in the older editions of the SIAC Rules is deemed to be a reference to the President. 

Further, if the plaintiff's argument was to be accepted, this would mean that if the Chairman was unavailable or unable to appoint an arbitrator for whatever reason, the arbitration agreement would be hamstrung and rendered unworkable.

Premised on the above, the Court found that the arbitrator had been properly appointed pursuant to the arbitration agreement. This decision highlights the Court’s inclination to adopt the principle of effective interpretation as opposed to the strict interpretation which would render the clause non-sensical and ineffective.